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18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Setting up as a Self Employed Person
Joe Harrington JF Harrington & Co Certified Public Accountants
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors 090 6481906
email [email protected]
Introduction
The purpose of the Discussion is to explore the way in which a person can become registered as self employed with the Revenue and the Companies Office.
My name is Joe Harrington and I run a small accountancy practice at Main Street Moate Co. Westmeath. I have been doing that for the last 19 years
2
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Topics for Discussion Sole Trader V Limited Company Partnership Registering your Business
Revenue CRO
Accounting Records to Be Mainatained Audit Exemption for Limited Companies What Can I Claim Against My Tax Transferring from Sole Trader to Co Filing Obligations with Revenue & CRO Tax Rates & Bands
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Topics for Discussion
PRSI & USC Rates Revenue Audit Consequences Implications of Employing Staff Retiring from The Business Appendices Questions & Answers
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Sole Trader V Limited Company
Tax Issues Limited Liability To Have a Company you must have 2 people Getting Money out of Company Your Information is on Public File Additional Fees With Company
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Sole Trader V Limited Company If a company commences trading there will be
no corporation tax for the first 3 years Corporation Tax is paid on Profits after Directors
Drawings at 12.5% In Sole Trader Situation the tax is on profits
before drawings 25% Corporation tax on Rental income &
Investment Income
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Partnership
Very Similar to a Sole Trader You also need to have 2 people to set a partnership up You need to register the Partnership with the CRO and
Revenue as soon as possible You also should have a partnership agreement drawn
up as soon as possible and have it done by a solicitor
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Registering Your Business
Sole Trader or Company you must register your business with the Revenue at the outset
In a sole trader situation you complete a form TR1 to register for all Taxes
The same Form is used for a partnership In a Limited company situation you complete a Form
TR2 to register for all taxes If a sole trader or partnership is trading or trades
under a business name you must
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Registering Your Business
Register it with the CRO by a completing a Form RBN1 Limted Company you must register with the CRO Once you decide on a name and it is available nobody
else can use that name In a company you must have 2 people to set up. You can own 100% of the shares therefore a single
member company
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Registering Your Business
With a Limited Company you complete a Form A1
The Memondum & Articles of Association will then be issued
Certifiacte of Incorporation Company Seal
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Transferring from a Sole Trader to a Company
Most Common for a business after trading for a few years Possible Tax Implications for the sole trader If property involved normally a lease drawn up between
company and sole trader All other assets transferred at tax written down value and
set up in the companies accounts as a directors loan
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
What can I Claim Against Tax
Any expense wholly & exclusive necessary for your business
In a limited Company situation you can claim travel & subsistence based on civil service rates
You can only claim the above in the course of your duties and not from home
Sole Trader/Partnership do your claim based on invoices paid
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
What Can I Claim Against my Tax
Medical Expenses that you incur and they are allowed at 20%
Contributions to a Personal Pension are deductible but are restricted dependant on your age
In a company situation you can set up a executive pension which is much more generous to what you can put into it
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
What Can I Claim Against My Tax
Also it is a good way of getting money out of your company tax free
Tuition Fees paid to Third Level Colleges allowable at 20% up to a maximum of €2,500 for a full time course and €1,250 for a part time one
Contributions for PHI are deductible against tax
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Accounting Records to be Maintained
Basic Records that need to be maintained are as follows: Cash Book/Sales Book Cheque Payments Book Purchases Listing Debtors/Creditors Ledger
Records can be maintained manually or on computer
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Accounting Records to be Maintained
They can be maintained on excel spreadsheet Various Tailored Made Accounts Package
such as Sage Line 50 big red book etc Records must be maintained for a period of 6
years
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Audit Exemption
A Significant Relief for Companies If you qualify you don’t have to get your
accounts audited by a independent auditor Significant saving on Fees To Qualify you have to satisfy the following
conditions: Turnover less than €8.8m
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Audit Exemption
Balance Sheet less than €4.4m Less Than 50 people Employed Accounts & Filing Requirements up to date
Not available to Companies Limited by guarantee
Not Available to Group Companies
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Filing Obligations with Revenue & CRO
As a sole trader or partnership no filing requirements with CRO
As a sole Trader you have to file your tax return by the 31st October each year
You must pay the balance ofyour tax for the current year and pay preliminary tax for the next year at that date also
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Filing Obligations with Revenue & CRO
With a Company you must file your CT1 with the revenue 8 months and 23 days after year end
Preliminary Tax due at the end of month 11 of your accounting period
Company Accounts and B1 has to be filed with CRO 9 months after year end
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Filing Obligations with Revenue & CRO
In a commencement situation the company has to file a B1 6 months after incorporartion
Vat Returns have to be filed every 2 months PAYE/PRSI returns every month
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Tax Rates & Bands
Cut off Point The amount you can earn before you pay 41% tax
€32,800 for a Single Person €41,800 for a Married Couple With One
Income The €41,800 can be increased by a further
€23,800 if both are working
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Tax Rates & Bands
Single Tax Credit €1,650 Married Tax Credit €3,300 PAYE Credit €1,650 Self Employed People Not Entitled to PAYE
Credit There is Marginal Releif and Single PAYE
Worker can earn €18,000 before pay Tax Married PAYE €36.000
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Tax Credit & Bands
Self Employed these figures are halved 2 Tax Rates 20% & 41%
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
PRSI & USC Rates
Self Employed Pay an S Stamp which is 4% on their income less Capital Allowances
There is a minimum contribution of €500 if your income is more than €5,000
This stamp doesn’t entitle you to anything other than a contributory pension
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
PRSI & USC Rates
If Income less than €10,036 no USC payable 2% on the first €10,036 4% on the next €5,980 7% on Balance If you earn over €100,000 you pay 10% Calculated on Income less capital allowances
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Revenue Audit & Consequences
When self employed you maybe subject to a revenue audit
Revenue come & Inspect your books and if not happy they will look for additional tax
As well as additional tax they will charged interest and penalties
Penalties can vary from 10% to 100% depending on the seriousness of the error
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Revenue Audit & Consequences
If Settlement Exceeds €33,000 to include interest and penalties it will be published in the papers
Before audit commences if you make a voluntary disclosure you will save on penalties and non publication
If not happy with Revenue you can appeal their decision to appeal commissioner and circuit court etc.
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Employing Staff
You must register as employer You will have to register each employee as
working for your company Liable to pay ER PRSI on their gross wages
which varies. Gross Wage up €356 is 4.25% and thereafter 10.75%
Pay them for All Public Holidays
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Employing Staff
Pay them all their Holiday Entitlements Once they are more than 2 years working they are
covered by the unfair dismissal act Once they are with you 2 years they are entitled to
Redundancy which is now fully payable by employer; up to 2012 there was a rebate of 15% and prior to that it was 60%
Once you take on someone ensure that you get a Terms & Conditions Employment Contract signed asap
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Retiring from the Business
Any Property or Goodwill will be liable for capital gains tax due at 33%
However if you are in business for 10 years and you are over 55 you can claim retirement relief up to the value of €750,000 between the age of 55 to 66 outside the family
This reduced to €500,000 for over 66 If you dispose or transfer to your family member there
is no limit on the amount provided between the age of 55 to 66 and the family member must work in the business for the previous 5 years
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Retiring from Business
If you sell or transfer to family after 66 there is a limit set at €3,000,000
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Appendices
TR1 Tax Registiration Form for Sole Trader TR2 Tax Registration for Company Flate Rates Expenses RBN1 to Register Business Name for Sole
Trader Form A1 to Incorporate Company Travel & Subsistence Tax Rates & Bands
18/05/2013JF Harrington & Co Certified Public Accountants & Registered Auditors
090 6481906 email [email protected]
Questions & Answers
Any Questions?